Previously we considered whether the Leeds detailed assessment pilot (click link) would reduce the judicial and court time spent dealing with costs disputes.  The new rules can be viewed here: County Court Provisional Assessment Pilot Scheme at Annex 2.

The next issue is whether provisional assessment will reduce the costs to the parties. Those costs practitioners worried that provisional assessment will reduce their fee income may not need to be too concerned just yet, even if the number of actual oral detailed assessments hearings reduces.

It will be recalled that Lord Justice Jackson was very clear that his proposed costs reforms were meant to be viewed as a complete package and should not be introduced on a piecemeal basis. The provisional assessment pilot is just such a piecemeal step.

Jackson LJ envisaged a much simplified bill of costs format. He envisaged different points of dispute and replies:

“Both points of dispute and points of reply need to be shorter and more focused. The practice of quoting passages from well known judgments should be abandoned. The practice of repeatedly using familiar formulae, in Homeric style, should also be abandoned. The pleaders on both sides should set out their contentions relevant to the instant cases clearly and concisely. There should be no need to plead to every individual item in a bill of costs, nor to reply to every paragraph in the points of dispute”.

The pilot scheme proceeds with these elements unaltered.

Such a scheme might have some chance of success in the Senior Courts Costs Office where, at least the full time, costs judges and costs officers are generally familiar with all the standard costs argument. It is less obvious that those judges sitting in Leeds, Scarborough and York County Courts will be as familiar with the intricacies of costs law. There is no suggestion that the provisional assessments will be conducted by any particular designated judge or regional costs judge. How knowledgeable are the district judges and deputy district judges who sit in these courts? This is not to suggest any shortcomings in the ability of these judges, but are they really all 100% up to speed on the minutiae of costs law?

I have been before judges on detailed assessment where they were convinced that “base costs” only refers to base profit costs.

I have been before a regional costs judge where the CFA in question was held to be invalid. I proceeded to explain that the consequence of this was that all disbursements would be disallowed except to the extent that they had been paid “up-front” by the claimant, whether personally or by way of a loan. The judge asked for the authority for this proposition. I referred the judge to paragraphs 113-116 and 223 of Hollins v Russell [2003] EWCA Civ. 718). The judge was not prepared to accept that this is what the relevant passages meant and adjourned the issue for detailed skeleton arguments to be served.

When much of the judiciary is not 100% familiar with every element of costs law – and why should they be expected to be? – the problems with provisional assessment become clear.

If I am faced with a claim for communications with an ATE provider I currently may deal with this in the points of dispute as briefly as:

“Not inter partes. Disallow.”

For the small number of cases that reach as far as detailed assessment I can worry nearer the time which authorities to wheel out in support of this argument.

If a matter might now be heard in one of the pilot courts by way of provisional assessment, is a costs draftsman/costs lawyer going to be content to draft such a concise dispute and hope the judge is already familiar with all the relevant case law (in the way one might expect in the SCCO)? Very risky.

Will it be sufficient to draft a dispute along the following lines referring to the relevant authorities:

“The Defendant submits that time spent discussing/arranging funding is not chargeable inter partes and refers to the cases of Re Claims Direct Test Cases [2002] EWHC 9002 (Costs), Masters –v- Hewden Stuart Heavy Lifting Limited, Leeds County Court, 18/3/05 and Woolley v Haden Building Services Ltd (No 2) [2008] EWHC 90111 (Costs). Disallow.”

With the provisional assessment process being envisaged to take approximately 45 minutes (apparently), can one expect a judge to take the time to track down various unreported decisions, quoted in points of dispute, and work his or her way through them to find the relevant paragraphs and extract the principle? Very unlikely.

Do those drafting points of dispute have any real alternative other than including lengthy quotes from the relevant authority on every point in case the judge is not familiar with the issue? What might have previously been a four word dispute may turn into a four page dispute.

When faced with points of dispute resembling skeleton arguments, is the receiving party going to decide they do not need to serve optional replies? Not a chance.

Are receiving parties going to be content to deal with the dispute above by simply saying:

“Not agreed.”

Will they be content to respond simply by referring to the names of the authorities which go the other way?

When faced with comprehensive points of dispute the receiving party will respond in kind.

Even if the paying party initially keeps their points of dispute relatively brief, when faced with the inevitable weighty tome served by the receiving party they will feel obliged to serve amended lengthy points of dispute in response. The automatic right to amend points of dispute and replies (CPD 40.10) remains in the provisional assessment process.

CPD 4.5 states:

“The background information included in the bill of costs should set out:

(1) a brief description of the proceedings up to the date of the notice of commencement”

As things stand, there are those who struggle to keep the description “brief”. With a provisional assessment there will be no chance to orally explain any particular problems with the way the claim proceeded. There will be no way of knowing to what extent the judge will read the papers in detail, if at all. One of Lord Justice Jackson’s proposals, in his final report, was for bills of costs to “provide more transparent explanation than is currently provided about what work was done in the various time periods and why [emphasis added]”. I previously expressed my concerns about this change to the bill of costs format (click clink). I can see this provisional assessment pilot encouraging much more of the “why” without any of the corresponding costs saving that Jackson LJ envisaged.

There is about to be an arms race in relation to the length of preambles to bills of costs and the complexity of points of dispute and replies, and all in the name of reducing the costs of assessment.

Would a law costs draftsman/costs lawyer who fails to comprehensively plead every single point available open themselves up to a negligence claim? Would they be negligent if they failed to serve amended/supplemental pleadings in light of lengthy points pleaded by the other side?

This is going to be a costs building bonanza for those involved in costs until the pilot scheme is hastily amended. Would claimant solicitors kindly ensure they issue all their cases out of Leeds, Scarborough or York for the foreseeable future?

Yesterday we examined what amounts to a “competent” law costs draftsman from the receiving party’s perspective. Today we will look at this from the paying party’s view point.

From the paying party’s perspective, the key criteria are similar as for a receiving party’s costs draftsman:

1. The ability to recognise that there may be problems with the retainer. Although a paying party will have less to work with, the scope for potential challenge is vast, with the various complex rules and regulations that surround this area. If a law costs draftsman fails to spot a potential breach, that would have meant all costs might have been disallowed, can they be described as “competent”?

2. The ability to identify all the potential “routine” challenges. For those who do not work in the field of legal costs it is probably hard to imagine quite how endless these can be. At the last ALCD examination, one of the questions required the drafting of points of dispute based on a sample bill of costs. From memory, the receiving party was meant to be a limited company. As such, VAT was wrongly claimed in the bill. Costs Lawyer magazine, commenting on the examination results said:

“many candidates (Associate and Fellowship) missed the VAT point. [This point was] fundamental to the job we do as costs draftsmen and costs lawyers. … An understanding of VAT is therefore vital to any successful costs draftsman or costs lawyer.”

The article did not go on to detail whether any of the candidates who failed to spot this issue were nevertheless passed at Associate or Fellowship level (shortly, if not already, to be granted Costs Lawyer status). Failing to spot this issue in real life would almost certainly lead to a professional negligence claim. “Competent”?

3. The same level of advocacy skill as should be expected from a receiving party’s costs draftsman. The irony of this test of “competence” is that there will be costs draftsmen who wouldn’t on any proper test be described as “competent” but nevertheless routinely “win” detailed assessments because the quality of the submissions made are often irrelevant to the outcome.

4. The ability to recognise when a bill of costs has been drafted in a fundamentally flawed manner. This will be particularly important in relation to the difficult areas of apportionment and division. How often is it not even recognised that such an issue arises?

The Association of Law Costs Draftsmen will need to think carefully as to what it means to be “competent” and how this is to be measured for those now being granted Costs Lawyer status.

The Association of Law Costs Draftsmen, when responding to concerns about the recent changes being made to the membership structure and qualification requirements, stated:

“The rights which [the ALCD] will regulate include rights of audience and rights to provide legal services, and may in due course include the right to practise reserved legal activities. This means that the relevant test has to be one of competence, not excellence. The ALCD would be failing in its duty to entrants and the public if it were to set the bar so high that only a select few could clear it.”

The relevant test being “competence, not excellence” is clearly correct. The Bar does not expect junior barristers to have the skill and knowledge of a QC. Unfortunately, this test does no more than beg the question as to what amounts to “competence” for those acting in the field of legal costs.

The fact that a newly qualified solicitor or barrister may be “allowed” to handle a murder trial or a catastrophic clinical negligence brain injury claim does not mean they should. One would hope they would have the sense to turn the instructions down, on the basis of lack of experience, given the importance of the matter. The same should apply to costs (although whether those of us who work in this field have already disqualified ourselves, in terms of having “sense”, is another matter).

In fact, the examples of a murder trial or catastrophic injury are perhaps misleading. Those types of claim are immediately obvious to identify, as are their importance and potential complexities. (Barristers also have the benefit of a clerk to act as an initial filter for cases out of the barrister’s depth.)

The position in relation to those who work in the field of legal costs is less straightforward. The ALCD’s stated aim is to have its members able to “deal with the vast majority of costs disputes without the assistance of counsel”.

From the perspective of those who act for the receiving party, there appear to be four key elements to competence:

1. The ability to recognise, when instructed to deal with a new case, that there may be problems with the retainer. This has many potential strands:

i. If the CFA pre-dates the revocation of the Conditional Fee Agreement Regulations 2000, is there a potential breach?

ii. If the CFA post-dates the revocation, is there still potentially a breach of primary CFA statute. (Yes, this is still a problem. I have already had one post-revocation CFA struck down as invalid by a Regional Costs Judge. The other week I had another case settle at the door of the court with the claimant taking a heavy hit to reflect the fact the CFA was potentially defective. There are plenty of others out there.)

iii. Are there potential problems caused by complicated rules surrounding retainers not made at the solicitors’ offices? How many of those working in the field of legal costs are really 100% up to speed on this?

iv. I previously mentioned Cook on Costs 2010, page 438, reporting on a Costs Practitioners’ Group meeting at the SCCO “whose view was that while Grade D fee earners might be able to draw straightforward bills of under £10,000, all other bills ought to be drafted by a Grade C fee earner, since costs are a technical matter, and matters such as the operation of the indemnity principle need more experience than a Grade D fee earner is likely to possess”. (I am note sure the Group really did say this but it is clearly Cook on Costs’ view.) The question of whether there ultimately has been a breach of the indemnity principle – eg is any given CFA invalid – may well be a complex and unpredictable question. However, the basic indemnity principle should not be complex to understand and, in my view, those who have not grasped the principle within the first few days of starting to be taught legal costs law have no place practising in costs at any level. Nevertheless, the fact that a work such as Cook on Costs expresses this view does suggest that there probably are some working in the field of legal costs who do not understand the indemnity principle (and I fear this may be correct) and really does beg the question as to what we are to judge “competence” by.

2. The ability to recognise a serious challenge when it is raised in points of dispute. At that stage it may be necessary to seek assistance from someone more experienced/specialised. Unfortunately, experience suggests that the seriousness of a challenge, to a retainer for example, is often not appreciated until a day or two before a detailed assessment hearing, when the matter is presumably referred up the chain. Worse, sometimes the seriousness of the challenge is not appreciated until the end of the detailed assessment when costs have been disallowed in their entirety. At this stage the receiving party has to purse the unsatisfactory course of trying to appeal the matter and bring in specialist costs counsel.

3. The ability to deal with any of the unexpected arguments that can arise during a detailed assessment hearing. This can arise in all types of advocacy and is the cornerstone of the “competent” advocate. This is not a skill that comes easily, except to a gifted few, and the limited amount of advocacy that the majority of us undertake in the role of law costs draftsmen brings limited opportunity to learn by experience. As a reader commented on a previous post: “the young barrister is in court almost every day, perfecting his craft. How can costs draftsmen compete?”.

4. The ability to properly draft a bill of costs. (I’m not just talking about claiming the correct VAT rate). Issues such as apportionment or division of costs, where there were a number of defendants, or where there are unusual costs orders, can be very complicated. Obviously, sometimes a bill is simply drafted in the most favourable way for the receiving party and arguments are awaited as to why it might be wrong. However, I am sure that bills are often drafted on a fundamentally wrong basis because the costs draftsman has not understood there is even an issue to address. When challenges are raised, the defect with the bill is still not understood.

Tomorrow we’ll look at “competence” from the paying party’s perspective.

Not long ago I commented on the perceived differences in the skills of specialist costs counsel compared with costs lawyers and concluded that the latter could not realistically expect to compete with the former.  The comments that were made on the post suggest that I am not alone in this view.

You can therefore imagine the sense of irony I felt in relation to the telephone call I received a day or two later from a defendant solicitor client.

They had previously instructed specialist costs counsel to attend a detailed assessment hearing.  Unfortunately, the bill of costs had been assessed for a few pounds more than the defendant’s offer and the the claimant had therefore been awarded the costs of the detailed assessment hearing.

Now, losing by a small margin is not exactly unknown in costs matters but there were one or two unfortunate features:

1. The defendant had made an offer before the bill of costs was drafted.  Excluding the costs of drafting the bill, the defendant would have won comfortably on the offer (see Forward v Burton [2005] EWHC 90003 (Costs)).  Counsel failed to argue this point.

2. The bill had been correctly drafted, at the time, claiming VAT at 15%.  The defendant’s offer had been based on 15% VAT.  No request had been made to amend the VAT claim in the bill.  Apparently, or at least so the court subsequently ruled, the defendant’s counsel had agreed VAT at 17.5% when doing the calculations with the other side outside court.  No attempt had been made to argue that consideration of whether the original offer had been successful should have been based on the VAT rate that applied when the offer had been made.  This made the difference between winning and losing. 

The barrister in question shall remain nameless but, from my limited experience of being against him in court, is a gifted junior (as specialist costs counsel almost invariably are).  So what went wrong?

I suspect this was a typical example of the potential limitations and drawbacks of relying on specialist costs counsel.  Or, at least, relying solely on costs counsel.

Specialist costs counsel are often fiendishly clever when it comes to arguing complex and novel points of costs law but often have much less of a grip on the rough-and-tumble of day-to-day disputes.  Issues that are, or at least should be, bread-and-butter for law costs draftsmen are ones that costs counsel are often far less familiar with because they tend to be instructed to deal just with the big issues, such as CFA compliance, rather than run-of-the-mill detailed assessments.  I know a number of costs counsel who would immediately agree that this is correct and often prefer to have a costs draftsman attend a detailed assessment with them to deal with the routine arguments.  The drawback with this, of course, is the extra cost of having both attend with every chance the judge will only allow the fees of one.

So, I’m now going to have to refine what I said before.  Costs counsel will generally be far more appropriate to instruct to deal with complex legal costs arguments and for cost appeals.  Law costs draftsmen/costs lawyers may be better for routine detailed assessments and, sometimes, to assist costs counsel on cases that span both complex and routine issues (even if you shouldn’t expect to recover two sets of fees). 

To add to the problem faced by instructing solicitors, they often have to rely on their costs draftsman/lawyer to advise them on whether there is indeed a problem complex enough to merit involving specialist costs counsel.  I’ve seen enough cases to know that sometimes this is only appreciated during the middle of the detailed assessment when the costs draftsman/lawyer finds themselves floundering.  Or worse, at the end of the assessment hearing when it has all gone horribly wrong.